13D Filing: Starboard Value Reports Stake and Goes Activist on Depomed Inc (DEPO)

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(e)           No Reporting Person, nor any person listed on Schedule A, annexed hereto, has, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
(f)           Messrs. Smith, Mitchell, Feld, Molinelli, Sullivan and Fogarty are citizens of the United States of America.  The citizenship of the persons listed on Schedule A is set forth therein.
Item 3.
Source and Amount of Funds or Other Consideration.
The Shares purchased by each of Starboard V&O Fund, Starboard S LLC and Starboard C LP and held in the Starboard Value LP Account were purchased with working capital (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases, except as otherwise noted, as set forth in Schedule B, which is incorporated by reference herein.  The aggregate purchase price of the 3,189,313 Shares beneficially owned by Starboard V&O Fund is approximately $46,310,391, excluding brokerage commissions.  The aggregate purchase price of the 377,502 Shares beneficially owned by Starboard S LLC is approximately $5,516,821, excluding brokerage commissions. The aggregate purchase price of the 209,844 Shares beneficially owned by Starboard C LP is approximately $3,046,876, excluding brokerage commissions. The aggregate purchase price of the 363,341 Shares held in the Starboard Value LP Account is approximately $5,305,001, excluding brokerage commissions.
Item 4.
Purpose of Transaction.
The Reporting Persons purchased the Shares based on the Reporting Persons’ belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity.  Depending upon overall market conditions, other investment opportunities available to the Reporting Persons, and the availability of Shares at prices that would make the purchase or sale of Shares desirable, the Reporting Persons may endeavor to increase or decrease their position in the Issuer through, among other things, the purchase or sale of Shares on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem advisable.
 
The Reporting Persons have significant concerns regarding serious corporate governance deficiencies, questionable capital allocation decisions, and egregious actions taken by the Issuer’s Board to impede strategic interest in acquiring the Issuer and to suppress shareholder rights.  In combination, these concerns have led the Reporting Persons to believe that management and the Board may be more interested in entrenching themselves than in delivering maximum value for all shareholders.  The Reporting Persons have been closely monitoring all developments at the Issuer since 2015 when the Issuer took a series of shareholder-unfriendly steps to frustrate the attempts of Horizon Pharma to negotiate an acquisition of the Issuer for at least $33.00 per Share.  As of yesterday’s close, the Issuer’s market price was $14.83 per Share.  
 
The Reporting Persons have reviewed the preliminary proxy statement (the “Preliminary Proxy”) filed by the Issuer on April 5, 2016 in connection with the Issuer’s 2016 Annual Meeting that is scheduled to be held on May 18, 2016.  Specifically, the Reporting Persons carefully reviewed the Issuer’s proposal seeking shareholder approval to change the Issuer’s state of incorporation from California to Delaware (the “Reincorporation Proposal”).  The Reporting Persons are extremely troubled by the fact that management and the Board of the Issuer are seeking to further entrench themselves and further suppress shareholder rights under the guise of the Reincorporation Proposal.  Specifically, the Reincorporation Proposal, if effected, would: (i) eliminate altogether the ability of shareholders to call a special meeting for the purpose of removing and replacing current Board members; and (ii) prevent shareholders, for all practical purposes, from commencing a special meeting request process within 180 days of any Annual Meeting of the Issuer.  The Reporting Persons question why the Issuer failed to disclose these important features of the Reincorporation Proposal in the section of the Preliminary Proxy detailing the specifics of the Reincorporation Proposal and instead included these provisions in appendices to the Preliminary Proxy.
 
The Reporting Persons note that the Issuer has a troubling record of egregiously manipulating the corporate machinery to entrench management and the Board and believe that meaningful change is required to ensure the Issuer is acting in the best interest of all shareholders.  To that end, in order to preserve the Reporting Persons’ rights under California law and the Issuer’s current Bylaws to seek the removal and replacement of the current Board, the Reporting Persons intend to deliver later today to the Secretary of the Issuer a formal written request, as required under the Bylaws, that the Board set a record date for determining the shareholders entitled to request a special meeting of shareholders (the “Record Date Request Notice”).  The Issuer’s onerous special meeting Bylaw provisions require that the Reporting Persons put forth its slate of director candidates as part of this initial step in commencing the special meeting process, as well as the other matters to be acted upon at the special meeting, including the removal of the full Board.  The Reporting Persons intend to continue their search for, and to nominate at the appropriate time, a slate of director candidates that the Reporting Persons believe will ensure an experienced, diverse, and multi-industry Board.  The slate of director candidates that the Reporting Persons seek shareholder support to elect at a special meeting may include one or more of the Nominees named in Item 2 above.
 

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